6th Sep 2007 07:00
Galiform PLC06 September 2007 GALIFORM Plc INTERIM RESULTS FOR THE 24 WEEKS ENDED 16 JUNE 2007-------------------------------------------------------------------------------- HIGHLIGHTS • Revenue from continuing operations £429.0m (2006: £285.3m). > Reflects additional trading week for Howden Joinery (c. £10m) and growth in external turnover of Supply in relation to interim supply arrangements (c.£100m), particularly with MFI Retail Limited (MFI), in 2007. > Howden Joinery up 10.7%, adjusted for additional trading week (6.6% same depot basis). • Howden Joinery operating profit before exceptional items up £4.4m to £55.1m. > Gross margin similar to 2006 full year margin. • Cost of Supply, our sourcing and manufacturing business, before exceptional items down £12.2m to £13.2m, including a currency gain of £4.6m. • Profit before tax and exceptional items from continuing operations rose £16.3m to £24.8m (£24.1m after exceptional items (2006: £34.7m loss)). • Basic earnings per share before exceptional items from continuing operations 2.7p (2006: (1.4)p). • Basic earnings per share from continuing and discontinued operations 7.0p (2006: (0.1)p). • Net cash inflow of £7.8m resulted in the Group having net funds of £3.7m at 16 June 2007. • As already announced, date for termination of supply of products and logistics services to MFI brought forward to 21 December 2007. > Final order received in August. > Proposals for restructuring of Supply business announced. • 27 new Howden Joinery depots opened so far in 2007 - on track to open 60 in the year. • As previously announced, payment of £53.1m made to MEP Mayflower (Holdings) Limited on 3 September 2007. Galiform's Chief Executive, Matthew Ingle, said: "Over the first half, we made good progress, both operationally and in ourstrategic development. Howden Joinery traded well in the first half and hascontinued to do so, and it is on track to open 60 depots in 2007. "We retain a positive outlook for the remainder of the year, although werecognise that a decline in consumer confidence could lead to a softening indemand. The relationship with MFI has proceeded satisfactorily and Supply ispositioning itself to focus solely on supporting Howden Joinery going forward." Enquiries Investors/analysts: Gary RawlinsonHead of Investor Relations +44 (0)207 404 5959 (6 September only) +44 (0)207 535 1127 +44 (0)7989 397527 Media: Brunswick +44 (0)207 404 5959 Susan Gilchrist Fiona Laffan Anna Jones SUMMARY OF GROUP RESULTS-------------------------------------------------------------------------------- The information presented below relates to the 24 weeks to 16 June 2007 and the24 weeks to 10 June 2006, unless otherwise stated. £m unless stated 2007 2006Continuing operations (before exceptional items unless stated):Revenue 429.0 285.3Gross profit 190.0 141.8Operating profit 29.5 12.7Profit before tax- excluding exceptional items 24.8 8.5- including exceptional items(1) 24.1 (34.7) Earnings per share from continuing operations- basic excluding exceptional items 2.7p (1.4)p- basic including exceptional items 7.0p (7.1)p (Loss)/profit before tax from discontinued operations- excluding exceptional items - (22.3)- including exceptional items - 34.9 Earnings per share from continuing and discontinued operations- basic excluding exceptional items 2.7p (4.5)p- basic including exceptional items 7.0p (0.1)p Net funds at end of period 3.7 92.9 (1) Details of exceptional items for the 24 weeks to 16 June 2007 are shown in note 3. (2) The Group currently operates two distinct businesses, Howden Joinery and Supply, which form the basis on which the Group reports its primary segment information for the 24 weeks to 16 June 2007. This format will be followed for the Preliminary Results for the 52 weeks ending 29 December 2007. For 2008, with the ending of the supply arrangements with MFI, the Group intends to report its results as a single entity. GROUP RESULTS The following discussion relates to continuing operations, there being no discontinued operations in 2007.-------------------------------------------------------------------------------- Revenue rose by £143.7m to £429.0m, reflecting the increased sales of HowdenJoinery (£41.6m) and third party sales of Supply (£101.8m). The increase insales by Howden Joinery partly reflected the impact of the first week of 2007being a trading week, whereas it was Christmas week in 2006, when depots wereclosed. The growth of third party sales by Supply reflected MFI being anexternal customer in 2007, having been part of the Group until October 2006. Excluding exceptional items, gross profit increased by £48.2m to £190.0m. Withselling and distribution costs and administrative expenses increasing by £31.2m,operating profit before exceptional items was £29.5m (2006: £12.7m). The netinterest charge rose £0.5m to £4.7m. The net result was profit before tax andexceptional items of £24.8m (2006: £8.5m). Exceptional charges before tax totalled £0.7m, giving profit before tax of£24.1m (2006: £34.7m loss). The exceptional charge relating to the restructuringof Supply (around £35m), announced in June 2007, will be accounted for in thesecond half of the year. The tax charge on profit before tax excluding exceptional items was £8.4m, basedon a tax rate of 34%, being the estimated effective rate of tax for the 2007financial year. In addition, the Group has recognised deferred tax assets incertain of its subsidiaries (£26.0m) that were previously unrecognised. Giventheir size and one-off nature, they have been treated as exceptional items (seenote 5). Basic earnings per share excluding exceptional items was 2.7p (2006: 1.4p loss)and including exceptional items was 7.0p (2006: 7.1p loss). Net cash flows from operating activities were £9.6m. Net capital expenditure was£6.5m (2006: £0.6m net receipts). Payments to acquire fixed and intangibleassets totalled £6.6m (2006: £13.2m). In the first half of 2007, there was acash inflow of £7.8m (2006: £148.4m). At 16 June 2007, the Group had net fundsof £3.7m, compared with net borrowings of £4.1m at the start of the period. At 16 June 2007, the pension liability shown on the balance sheet stood at£78.9m (30 December 2006: £189.2m). Of the decrease, over £80m arose from areduction of the schemes' liabilities, reflecting an increase in the liabilitydiscount rate. The remainder related to an increase in value of the schemes'assets, reflecting higher equity prices. DIVIDEND There will be no interim dividend (2006: nil). The Board will consider whether it is appropriate to recommend a nominal finaldividend when it reviews the 2007 full year results in March 2008. OPERATIONAL REVIEW-------------------------------------------------------------------------------- HOWDEN JOINERY Howden Joinery sells kitchens and joinery products to the building trade,predominantly small local builders, via a nationwide network of depots. Results ------------------------------------------------------------------------------ 2007 2006 £m £m------------------------------------------------------------------------------Revenue 314.5 272.9Operating profit before exceptional items 55.1 50.7------------------------------------------------------------------------------ Howden Joinery continued to trade well throughout the period, against abackground of rising interest rates. Revenue increased by £41.6m to £314.5m. Aspreviously indicated, the inclusion of a 53rd week in 2006 means that thebusiness traded for all of the period in 2007, whereas in 2006 the depots wereclosed during the first week, which covered the Christmas shutdown. Adjustingfor this by comparing the first half of 2007 with the same calendar period in2006, total revenue increased by 10.7%, up 6.6% on a same depot basis. Thisreflected a continuing increase in the turnover of mature depots, which havetypically been operating for six years or more, the benefit of the maturingprofile of sales from newer depots and new depot openings. Of particular notehas been the sales of doors and joinery products, which have benefited from theintroduction of a more extensive range of doors and a new joinery catalogue lastautumn. Gross margin in the first half of 2007 was similar to that seen in 2006as a whole. The rise in sales through existing and new depots, after allowing forsales-related cost increases, contributed £7.8m to the growth in operatingprofit. This was partly offset by an increase in non-depot costs of £3.4m. Thenet result was that operating profit before exceptional items rose by £4.4m to£55.1m. The main elements of the increase in non-depot costs related to increasedexpenditure on promotional material and expenditure incurred in relation to amajor new product design initiative to address the issue of the kitchens thatwill be required to meet market requirements beyond the short term (see Supplybelow). In addition, costs were incurred in relation to the launch of a newfacility that is primarily intended to make Howden Joinery an attractivesupplier to larger organisations that have not used the business in the past(see below - 'Trade Expo Centre'). Business developments So far this year, 27 new depots have been opened, bringing the total number to409, the business remaining on course to open 60 during the year. In addition, 2existing depots have been relocated and 4 were extended. In May, Howden Joinery opened its 'Trade Expo Centre' (the Centre), the primarypurpose of this new facility being to provide a showcase for the business. TheCentre has an extensive range of existing products on display, in inspirationaland innovative settings designed to inspire the visitor, which is not possiblewithin the confines of the limited show area of a depot. The Centre is intended to appeal to professionals from larger organisations thatpurchase kitchens, such as house builders, local authorities and housingassociations, which may not have used Howden Joinery in the past. This may havebeen because of a lack of appreciation of what the business has to offer andawareness of the scale of the organisation behind the local depots. In addition, the Centre provides a forum to educate depot staff about theproduct range and the scope of design opportunities that it presents. Finally,it also provides an opportunity for depots to enable their existing andpotential trade customers to see the range of products offered by the businessin realistic settings. The initial focus of the Centre was on employees, of whom over 2,500 (65% ofdepot employees) have visited the facility. In addition, over 600 existing andpotential trade customers have also visited the Centre so far. Following comments from its customers, a Howden Joinery website (www.howdens.com) was launched in April. Initially, this featured the range of kitchens offered by the business but it has now been extended to include all the main product groups. This supports the extensive range of product catalogues, etc., that builders can show their customers. SUPPLY Supply primarily sources products for Howden Joinery. The products are eithermanufactured, in the case of kitchen cabinets and worktops, or sourced fromthird parties by Supply. As part of the transitional arrangements following thedisposal of Hygena Cuisines and MFI, which have proceeded satisfactorily, Supplyalso sources products for these businesses on an interim basis. Results External turnover of Supply was £111.1m (2006: £9.3m), reflecting sales to MFIand Hygena Cuisines as third parties, the former having been part of the Groupin 2006. The net cost of Supply before exceptional items decreased to £13.2m (2006:£25.4m). This primarily reflected the move from manufacturing to buying-infascias and own-brand appliances that was instigated in the first half of 2006as part of the drive to bring a new commercial focus to Supply. The benefits ofthis change were indicated when it was announced in February 2006. In addition,there was an increased currency gain arising from the strengthening of the poundagainst the euro and the US dollar (this gain is against the currencyassumptions used in setting standard prices). Business developments Following the agreement to bring forward the termination of the supply andlogistics arrangements with MFI to December 2007, detailed proposals for therestructuring of our Supply business were announced on 27 June 2007. A period ofconsultation with employees and their representatives is now underway. In relation to the revised supply and logistics arrangements with MFI, the finalproduct order from MFI, for delivery by 21 December 2007, was received inAugust. As one of the major suppliers of kitchens in the UK market, it is important thatHowden Joinery is supplying a comprehensive range of products that both inspiresand meets consumers' needs. Not only does this mean having products that areappropriate for today, it also means considering the products that will berequired in the future as factors affecting consumer preferences change. To ensure that the business remains in a competitive position both in the shortand the longer term, two initiatives have been pursued. First, a new 15,000square foot design facility has been built at Supply's headquarters at Howden inYorkshire. This enables prototype products to be built and viewed in realisticsettings, where they can be critically evaluated before being brought to market.Second, in beginning to address the issue of future trends in the kitchen marketand thus ensure that Howden Joinery is offering appropriate products, a 'designforum' has been held to help develop our thinking. This involved liaising withexternal design consultants and suppliers to consider issues that mightinfluence kitchen design in the longer term, such as environmental concerns, thetrend to smaller properties and the blurring of the distinction between rooms,particularly in apartment-style properties. A number of 'concept' kitchens werethen designed and built. This phase of work culminated in a major 'design forum'event, where the concepts were shown and explained to audiences that includedall of Howden Joinery's depot managers and a large gathering of our suppliers. CORPORATE The cost of the corporate centre was broadly unchanged at £10.7m (2006: £11.0m). CURRENT TRADING AND OUTLOOK-------------------------------------------------------------------------------- In the first two periods in the second half of the year, Howden Joinerycontinued to trade well. Gross margin remained in line with 2006. The increasein sales compared with last year on a period by period basis has risen, suchthat total sales (on an adjusted basis) for the first eight periods of 2007 (to11 August) are now up by 11.9%, up 7.7% on a same depot basis. However, therecent rise in sales may have been enhanced by builders undertaking moreinternal jobs than would be normal due to the very wet weather this summer.Although the business continues to trade well, there is a risk that the economicenvironment may have an impact on demand in the future. The Supply business has seen the full benefit of the change from manufacturingto buying-in fascias and appliances that was implemented in the middle of lastyear. If the business continues to benefit from current exchange rates for theremainder of the year, the impact on a comparative basis will be less than inthe first half because of the currency strengthening seen in the second half oflast year. Corporate costs in the second half of the year will reflect the additionalperiod compared with the first half (seven versus six). In addition, pensionlevy and share option costs are especially biased to the second half of theyear, adding around £2m to costs relative to the first half. Consolidated income statement 24 weeks to 16 June 2007 24 weeks to 10 June 2006 53 weeks to 30 December 2006 unaudited unaudited audited Before Before Before exceptional Exceptional exceptional Exceptional exceptional Exceptional items items Total items items Total items items Total Notes £m £m £m £m £m £m £m £m £m Continuingoperations: Revenue 2 429.0 - 429.0 285.3 - 285.3 733.0 - 733.0 Cost of sales (239.0) - (239.0) (143.5) - (143.5) (370.5) (12.8) (383.3)------------------------------------------------------------------------------------------------------------------- Gross profit 190.0 - 190.0 141.8 - 141.8 362.5 (12.8) 349.7 Selling & distribution costs (134.2) (0.5) (134.7) (103.3) - (103.3) (241.6) (12.7) (254.3) Administrative expenses (26.5) - (26.5) (26.2) (43.2) (69.4) (56.2) 7.8 (48.4) Other operating expenses - (0.2) (0.2) - - - - (14.5) (14.5) Share of joint venture profits 0.2 - 0.2 0.4 - 0.4 1.0 - 1.0 -------------------------------------------------------------------------------------------------------------------Operating profit/(loss) 2 29.5 (0.7) 28.8 12.7 (43.2) (30.5) 65.7 (32.2) 33.5 Finance income 4 0.4 - 0.4 1.7 - 1.7 3.5 - 3.5 Finance expense 4 (4.2) - (4.2) (3.2) - (3.2) (7.0) - (7.0) Other finance charges - pensions 4 (0.9) - (0.9) (2.7) - (2.7) (5.0) - (5.0) -------------------------------------------------------------------------------------------------------------------Profit/(loss) before tax 24.8 (0.7) 24.1 8.5 (43.2) (34.7) 57.2 (32.2) 25.0 Tax on profit/loss 5 (8.4) 26.0 17.6 (16.6) 9.2 (7.4) (20.9) 2.0 (18.9) ------------------------------------------------------------------------------------------------------------------- Profit/(loss) after tax from continuing operations 16.4 25.3 41.7 (8.1) (34.0) (42.1) 36.3 (30.2) 6.1 -------------------------------------------------------------------------------------------------------------------Discontinued operations: Profit/(loss) before tax - - - (22.3) 57.2 34.9 (44.8) (134.8) (179.6) Tax on profit/loss - - - 4.0 2.7 6.7 5.1 (2.3) 2.8 -------------------------------------------------------------------------------------------------------------------Profit/(loss) after tax from discontinued operations - - - (18.3) 59.9 41.6 (39.7) (137.1) (176.8) Profit/(loss) for the period 16.4 25.3 41.7 (26.4) 25.9 (0.5) (3.4) (167.3) (170.7)------------------------------------------------------------------------------------------------------------------- Earnings per share: 6 pence pence pence-------------------------------------------------------------------------------------------------------------------From continuing operations Basic earnings per 10p share 7.0 (7.1) 1.0 Diluted earnings per 10p share 6.8 (7.1) 1.0 From continuing and discontinued operations Basic earnings per 10p share 7.0 (0.1) (28.7) Diluted earnings per 10p share 6.8 (0.1) (28.7) ------------------------------------------------------------------------------------------------------------------- Consolidated balance sheet------------------------------------------------------------------------------------- As at As at As at 16 June 10 June 30 December 2007 2006 2006 unaudited unaudited audited Notes £m £m £m-------------------------------------------------------------------------------------Non current assetsIntangible assets 3.6 3.6 1.9Property, plantand equipment 93.9 178.0 97.1Investments 9.5 9.1 9.7Deferred tax asset 50.7 94.6 60.6------------------------------------------------------------------------------------- 157.7 285.3 169.3-------------------------------------------------------------------------------------Current assetsInventories 111.8 147.1 126.1Trade and otherreceivables 147.0 150.0 102.4Other assets 3.2 3.8 3.1Cash at bank andin hand 41.8 139.7 53.2------------------------------------------------------------------------------------- 303.8 440.6 284.8------------------------------------------------------------------------------------- Total assetsclassified asheld for sale - 14.7 --------------------------------------------------------------------------------------Total assets 461.5 740.6 454.1------------------------------------------------------------------------------------- Current liabilitiesTrade and otherpayables (276.7) (339.1) (249.6) Non current liabilitiesBorrowings (39.1) (52.1) (58.2)Other payablesdue in more thanone year - - (10.8)Pension liability 11 (78.9) (295.6) (189.2)Provisions (23.0) (9.6) (23.8)------------------------------------------------------------------------------------- (141.0) (357.3) (282.0)-------------------------------------------------------------------------------------Total liabilitiesassociated withassets classifiedas held for sale - (3.6) --------------------------------------------------------------------------------------Total liabilities (417.7) (700.0) (531.6)------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------Netassets/(liabilities) 43.8 40.6 (77.5)------------------------------------------------------------------------------------- Equity/(deficit)Called up share capital 7 63.4 62.8 63.2Share premium account 7 84.9 81.5 83.7ESOP reserve 7 (37.9) (49.6) (43.2)Other reserves 7 28.1 28.1 28.1Retained earnings 7 (94.7) (82.2) (209.3)-------------------------------------------------------------------------------------Total equity/(deficit) 43.8 40.6 (77.5)------------------------------------------------------------------------------------- Consolidated cash flow statement ----------------------------------------------------------------------------------- Notes 24 weeks to 24 weeks to 53 weeks to 16 June 10 June 30 December 2007 2006 2006 unaudited unaudited audited £m £m £m-----------------------------------------------------------------------------------Net cash flows fromoperating activities 8 9.6 75.6 70.0 Cash flows from investing activitiesInterest received 0.4 1.7 3.5Sale of subsidiary undertakings - 74.6 (2.1)Payments to acquire property, plant and equipment and intangible assets (6.6) (13.2) (30.3)Dividend received from joint venture investment 0.4 - -Receipts from sale of property, plant and equipment and intangible assets 0.1 12.6 12.0-----------------------------------------------------------------------------------Net cash (used in)/from investing activities (5.7) 75.7 (16.9)----------------------------------------------------------------------------------- Cash flows from financing activitiesInterest paid (2.1) (3.5) (6.3)Receipts from issue of own share capital 1.4 0.5 2.9Receipts from release of shares from share trust 4.6 - 1.6Decrease in loans (19.1) (97.9) (89.6)(Decrease)/increase in other assets (0.1) 1.7 2.4-----------------------------------------------------------------------------------Net cash used in financing activities (15.3) (99.2) (89.0)-----------------------------------------------------------------------------------Net (decrease)/increase incash and cash equivalents (11.4) 52.1 (35.9) Cash and cash equivalentsat beginning of period 8 53.2 89.0 89.0Currency translation differences - 0.1 0.1-----------------------------------------------------------------------------------Cash and cash equivalentsat end of period 8 41.8 141.2 53.2----------------------------------------------------------------------------------- For the purposes of the cash flow statement, cash and cash equivalents areincluded net of overdrafts payable on demand. Total cash of £141.2m at 10 June2006 is made up of £139.7m shown on the balance sheet as cash and cashequivalents, and £1.5m included in assets for sale. Consolidated statement of recognised income and expense ----------------------------------------------------------------------------- 24 weeks to 24 weeks to 53 weeks to 16 June 10 June 30 December 2007 2006 2006 unaudited unaudited audited £m £m £m-----------------------------------------------------------------------------Actuarial gains on definedbenefit schemes 104.2 - 64.2Deferred tax on actuarialgain on defined benefitpension schemes (31.3) - (19.2)Currency translation differences - (0.7) (0.3)Impact of first-timeadoption of IAS 39 - (0.9) ------------------------------------------------------------------------------Net income/(loss) recognised directly in equity 72.9 (1.6) 44.7Profit/(loss) for thefinancial period 41.7 (0.5) (170.7)-----------------------------------------------------------------------------Total recognised incomeand expense for the period 114.6 (2.1) (126.0)----------------------------------------------------------------------------- Notes to the Financial Statements-------------------------------------------------------------------------------- 1 Basis of preparation and accounting policies This interim financial information, which is unaudited, has been prepared inaccordance with the Listing Rules of the Financial Services Authority and inaccordance with recognition and measurement requirements of InternationalFinancial Reporting Standards as adopted for use in the European Union ("IFRS").It is prepared on the basis of the principal accounting policies which areapplicable as at the date of approval of these financial statements. Theseaccounting policies are consistent with the policies applied in the 53 weeks to30 December 2006, which are published as part of the Annual Report and Accountsfor that period and which are available from the Group's website(www.galiform.com). As permitted, the Group has not adopted IAS 34 'InterimFinancial Reporting', which is not yet mandatory for UK groups. The taxation charge is calculated by applying the annual effective tax rate tothe profit for the period. The results for the 24-week periods ended 16 June 2007 and 10 June 2006 areunaudited but have been reviewed by the Group's auditors, whose report formspart of this document. This interim financial information does not constitutefull statutory accounts as defined by Section 240 of the Companies Act 1985. Thefigures for the 53 weeks to 30 December 2006 are derived from the publishedstatutory accounts. Full statutory accounts for the 53 weeks ended 30 December2006, including an unqualified auditors' report, have been delivered to theRegistrar of Companies. The items classified as discontinued operations for the 24 weeks to 10 June 2006have been revised since the 2006 interim accounts. At the time of publishing the2006 interim accounts, the MFI Retail business had not been discontinued, and soit was treated as a continuing operation in those accounts. The MFI Retailbusiness was sold in October 2006, and so it was treated as a discontinuedoperation in the accounts for the 53 weeks to 30 December 2006. In these interimaccounts, the figures for the 24 weeks to 10 June 2006 have been represented toshow the MFI Retail business as discontinued. This is in accordance with IFRS 5. 2 Segmental analysis The following tables show the segmental analysis of external turnover andoperating profit by business segment. This is based on the commercial and legalstructure of the Group, in which Howden Joinery, Supply and Corporate areseparate entities. -------------------------------------------------------------------------------- 24 weeks 24 weeks 53 weeks to to 16 June to 10 June 30 December 2007 2006 2006 unaudited unaudited audited £m £m £m--------------------------------------------------------------------------------External revenueContinuing operationsHowden Joinery 314.5 272.9 676.3Supply 111.1 9.3 50.8Other 3.4 3.1 5.9-------------------------------------------------------------------------------- 429.0 285.3 733.0Retail and other discontinued operations - 333.6 546.8--------------------------------------------------------------------------------Total revenue 429.0 618.9 1,279.8-------------------------------------------------------------------------------- Operating profit/(loss) before exceptionalitemsContinuing operationsHowden Joinery 55.1 50.7 132.6Supply (13.2) (25.4) (39.6)Corporate (10.7) (11.0) (24.2)Other (1.9) (2.0) (4.1)Share of joint venture 0.2 0.4 1.0-------------------------------------------------------------------------------- 29.5 12.7 65.7Retail and other discontinuedoperations - (22.3) (44.8)--------------------------------------------------------------------------------Total operating profit/(loss)before exceptional items 29.5 (9.6) 20.9-------------------------------------------------------------------------------- 3 Exceptional items Exceptional items related to continuing operations charged to operating profitin the 24 weeks to 16 June 2007 are analysed as follows: --------------------------------------------------------------------------------Unaudited Selling and distribution Other operating costs expenses Total £m £m £m--------------------------------------------------------------------------------Loss on sale of tangiblefixed assets - (0.2) (0.2)Supply restructuring (0.3) - (0.3)IT restructuring (0.2) - (0.2)--------------------------------------------------------------------------------Total charged to operating profit (0.5) (0.2) (0.7)Tax credit on exceptional items ---------------------------------------------------------------------------------Total operating exceptionalitems after tax (0.7)Exceptional tax credit -see note 5 26.0--------------------------------------------------------------------------------Total exceptional items after tax 25.3-------------------------------------------------------------------------------- 4 Finance income, finance expenses and other finance charges -------------------------------------------------------------------------------- 24 weeks 24 weeks 53 weeks to to 16 June to 10 June 30 December 2007 2006 2006 unaudited unaudited audited £m £m £m--------------------------------------------------------------------------------Finance incomeBank interest receivable 0.4 1.7 3.5-------------------------------------------------------------------------------- Finance expensesBank interest paid (2.4) (3.2) (6.0)Interest charge on remeasuringcreditors to fair value (1.8) - (1.0)-------------------------------------------------------------------------------- (4.2) (3.2) (7.0)-------------------------------------------------------------------------------- Other finance charges - pensionsFinance element of pension charge (0.9) (2.7) (5.0)-------------------------------------------------------------------------------- 5 Tax -------------------------------------------------------------------------------- 24 weeks 24 weeks 53 weeks to to 16 June to 10 June 30 December 2007 2006 2006 unaudited unaudited audited £m £m £m--------------------------------------------------------------------------------Current taxCurrent year UK corporation tax 4.0 - 3.1Over provision in previous periods - (0.5) (1.1)--------------------------------------------------------------------------------Current tax charge/(credit) 4.0 (0.5) 2.0-------------------------------------------------------------------------------- Deferred taxCurrent year 4.4 3.1 18.2Over provision in previous periods - (1.9) (4.1)--------------------------------------------------------------------------------Deferred tax charge 4.4 1.2 14.1-------------------------------------------------------------------------------- Total tax charged in the incomestatement before exceptionaldeferred tax credit 8.4 0.7 16.1Exceptional deferred tax credit* (26.0) - ---------------------------------------------------------------------------------Total tax (credited)/charged inthe income statement (17.6) 0.7 16.1-------------------------------------------------------------------------------- Total tax (credited)/charged in the incomestatement:- continuing operations (17.6) 7.4 18.9- discontinued operations - (6.7) (2.8)--------------------------------------------------------------------------------Total tax (credited)/charged inthe income statement (17.6) 0.7 16.1-------------------------------------------------------------------------------- The tax charge is calculated at 34% of profit before exceptional items and tax,being the estimated effective rate of tax for the 2007 financial year. * As the financial condition of the Group has improved significantly over theperiod, the Group has recognised £26.0m of deferred tax assets in certain of itssubsidiaries. The relevant subsidiaries were loss making in 2006 and thereforeno deferred tax asset was booked on the balance sheet. Given the size andone-off nature, this deferred tax credit has been treated as an exceptionalitem. 6 Earnings per share ---------------------------------------------------------------------------------------------------------------------- 24 weeks to 16 June 2007 24 weeks to 10 June 2006 53 weeks to 30 December 2006 unaudited unaudited audited ---------------------------------------------------------------------------------------------------------------------- Weighted Weighted Weighted average Earnings average Earnings average Earnings number per number per number per Earnings of shares share Earnings of shares share Earnings of shares share £m m p m m p £m m p---------------------------------------------------------------------------------------------------------------------- From continuing operations Basic earnings per share 41.7 599.8 7.0 (42.1) 591.9 (7.1) 6.1 594.4 1.0 Effect of dilutive share options - 13.8 (0.2) - - - - 7.2 - ----------------------------------------------------------------------------------------------------------------------Diluted earnings per share 41.7 613.6 6.8 (42.1) 591.9 (7.1) 6.1 601.6 1.0 ---------------------------------------------------------------------------------------------------------------------- From discontinued operations Basic earnings per share - - - 41.6 591.9 7.0 (176.8) 594.4 (29.7) Effect of dilutive share options - - - - - - - - - ----------------------------------------------------------------------------------------------------------------------Diluted earnings per share - - - 41.6 591.9 7.0 (176.8) 594.4 (29.7)---------------------------------------------------------------------------------------------------------------------- From continuing and discontinued operations Basic earnings per share 41.7 599.8 7.0 (0.5) 591.9 (0.1) (170.7) 594.4 (28.7) Effect of dilutive share options - 13.8 (0.2) - - - - - - ----------------------------------------------------------------------------------------------------------------------Diluted earnings per share 41.7 613.6 6.8 (0.5) 591.9 (0.1) (170.7) 594.4 (28.7)---------------------------------------------------------------------------------------------------------------------- From continuing operations excluding exceptional items Basic earnings per share 16.4 599.8 2.7 (8.1) 591.9 (1.4) 36.3 594.4 6.1 From continuing and discontinued operations excluding exceptional items Basic earnings per share 16.4 599.8 2.7 (26.4) 591.9 (4.5) (3.4) 594.4 (0.6) ---------------------------------------------------------------------------------------------------------------------- In accordance with IAS 33 "Earnings per share", potential ordinary shares areonly treated as dilutive if their conversion to ordinary shares would decreaseearnings per share or increase loss per share. Therefore, where there is a loss,as in the two comparative periods above, no adjustment is made in respect ofpotential ordinary shares, and diluted earnings per share is equal to basicearnings per share. 7 Reconciliation of movement in reserves ------------------------------------------------------------------------------------------------- Called up share Share premium ESOP reserve Other reserves Retained Total capital account earnings £m £m £m £m £m £m-------------------------------------------------------------------------------------------------At 30 December2006 - audited 63.2 83.7 (43.2) 28.1 (209.3) (77.5)Profit for the period - - - - 41.7 41.7Net actuarial gain onpension schemes - - - - 72.9 72.9Issue of new shares 0.2 1.2 - - - 1.4Net movement in ESOP - - 5.3 - - 5.3-------------------------------------------------------------------------------------------------At 16 June 2007 -unaudited 63.4 84.9 (37.9) 28.1 (94.7) 43.8------------------------------------------------------------------------------------------------- 8 Notes to the cash flow statement (a) Net cash flows from operating activities ------------------------------------------------------------------------------------------------- 24 weeks to 16 24 weeks to 53 weeks to 30 June 2007 10 June 2006 December 2006 unaudited unaudited audited £m £m £m------------------------------------------------------------------------------------------------- Group operating profit/(loss) after exceptional itemsContinuing operations 28.8 (30.5) 33.5Discontinued operations - 34.9 (179.6)------------------------------------------------------------------------------------------------- 28.8 4.4 (146.1)Adjustments for:Depreciation and amortisation 7.8 18.4 40.9Share-based payments charge 0.7 1.8 3.8Share of joint venture profits (0.2) (0.4) (1.0)Loss on disposal of property, plant andequipment and intangible assets 0.2 15.1 14.5Other exceptional items (before tax) 0.5 (29.1) 152.5-------------------------------------------------------------------------------------------------Operating cash flows before movements inworking capital 37.8 10.2 64.6 Movements in working capital and exceptional itemsDecrease/(increase) in stock 14.3 6.5 (18.6)Increase in trade and other receivables (44.6) (44.4) (59.6)Increase in trade and other payables 9.7 107.0 115.4Difference between pensions operatingcharge and cash paid (7.1) (3.7) (10.7)HMRC refund restructural guarantee - 21.8 21.8Net cash flow - exceptional items (0.5) (21.8) (44.5)------------------------------------------------------------------------------------------------- (28.2) 65.4 3.8-------------------------------------------------------------------------------------------------Cash generated from operations 9.6 75.6 68.4Tax received - - 1.6-------------------------------------------------------------------------------------------------Net cash flows from operating activities 9.6 75.6 70.0------------------------------------------------------------------------------------------------- Net cash flow from operating activities comprises:Continuing operating activities 9.6 85.4 154.5Discontinued operating activities - (9.8) (84.5)------------------------------------------------------------------------------------------------- 9.6 75.6 70.0------------------------------------------------------------------------------------------------- (b) Reconciliation of movement in net debt ------------------------------------------------------------------------------------------------- 24 weeks to 16 24 weeks to 53 weeks to 30 June 2007 10 June 2006 December 2006 unaudited unaudited audited £m £m £m-------------------------------------------------------------------------------------------------Net debt at start of period (4.1) (55.5) (55.5)Net (decrease)/increase in cashand cash equivalents (11.4) 52.1 (35.9)Decrease/(increase) in investments 0.1 (1.7) (2.4)Decrease in debt and lease financing 19.1 97.9 89.6Currency translation differences - 0.1 0.1-------------------------------------------------------------------------------------------------Net funds/(debt) at end of period 3.7 92.9 (4.1)------------------------------------------------------------------------------------------------- Represented by:Cash and cash equivalents 41.8 139.7 53.2Investments 3.2 3.8 3.1Borrowings (41.3) (52.1) (60.4)Assets held for resale - 1.5 -------------------------------------------------------------------------------------------------- 3.7 92.9 (4.1)------------------------------------------------------------------------------------------------- (c) Analysis of net funds -------------------------------------------------------------------------------- Cash and cash Current asset Bank Net funds/ equivalents investment loans (borrowings) £m £m £m £m--------------------------------------------------------------------------------At 30 December 2006 - audited 53.2 3.1 (60.4) (4.1)Cash flow (11.4) 0.1 19.1 7.8--------------------------------------------------------------------------------At 16 June 2007 - unaudited 41.8 3.2 (41.3) 3.7-------------------------------------------------------------------------------- Closing bank loans at 16 June 2007 comprise £39.1m of non current liabilitiesand £2.2m of current liabilities. 9 Post balance sheet events In the 2007 Budget, the Chancellor announced his intention to reduce the rate ofCorporation tax from the current rate of 30% to a rate of 28% with effect from 1April 2008. As at the half year-end date (16 June 2007), the legislation had notpassed through the House of Commons and had therefore not been substantivelyenacted. Therefore, in accordance with IAS 12 "Income Taxes", we have notremeasured our current or deferred tax charge or provision in these interimresults to reflect the forthcoming change in tax rates. Since the half year-end date, the legislation has been substantively enacted.The change in rate will thereforebe reflected in our deferred tax balances inthe accounts for the full year to 29 December 2007, and will be reflected in ourcurrent tax balances after 1 April 2008. Under IAS 12 deferred tax assets andliabilities are calculated with reference to the tax rate at which they areexpected to crystallise in the future. In accordance with IAS 12, the rate usedin these interim accounts is 30%, but the rate used in the accounts for the fullyear to 29 December 2007 will be 28%. Current tax is calculated based on therate in force at the time. Therefore, current tax will be calculated at 30%until 1 April 2008, when it will be calculated at 28%. We are unable to quantify what the effect of the change in rate will be onfuture deferred tax assets and liabilities. As an illustrative example, if thenew rate of 28% was substantively enacted before the date of these accounts, theeffect on the deferred tax balances as at 16 June 2007 would be a £3.4mreduction of deferred tax assets and a £0.3m reduction of deferred taxliabilities. Of the total net reduction, £1.5m relating to items taken to equitywill be adopted via the SORIE and the remaining £1.6m will be adjusted via theIncome Statement. 10 Contingent liabilities Relating to the disposal of the MFI Retail operations As disclosed at the time of the transaction with MEP Mayflower Limited ("MEP"),the Group was the ultimate guarantor on leases in relation to 56 propertieswhich were occupied by the MFI Retail operations. By 16 June 2007, this numberhad reduced to 53 properties. The Group's guarantees are triggered if MEPsuffers financial distress and defaults on its obligations under the relevantleases. The current annual net rentals payable by the Group in respect of theseremaining properties total £16.4m. Remaining lease terms range between 3 monthsand 18 years from 16 June 2007. The Group is not aware of any signs which indicate that the purchaser is infinancial distress. There is uncertainty whether the purchaser will ever sufferfinancial distress and thereby trigger the guarantee, and as to whether therewould be any actual net liability if the Group ever did have to meet the leaseobligations, given that the Group could mitigate any liabilities by surrenderingor assigning the leases, or by subletting them to third parties. Because of the nature of the uncertainties, as described above, the Group isunable to give an estimate of the financial effect of this contingent liability. The Group is also exposed to potential costs in respect of certain warrantiesand indemnities in relation to the disposal agreement in favour of thepurchaser. The Group has made such provision as is considered necessary in thisrespect. The full list of contingent liabilities, as disclosed in the 2006 Annual Reportand Accounts, has not been reproduced in these interim accounts, as managementconsider that there has been no significant change in any of the contingentliabilities disclosed in the 2006 Annual Report and Accounts other than the oneshown above. 11 Retirement benefit obligations (a) Total amounts charged in respect of pensions in the period ------------------------------------------------------------------------------------ 24 weeks to 24 weeks to 53 weeks to 16 June 10 June 30 December 2007 2006 2006 unaudited unaudited audited £m £m £m------------------------------------------------------------------------------------Charged/(credited) to the income statementDefined benefit schemes - total operatingcharge/(credit) 2.6 13.2 (17.1)Defined benefit schemes - net finance charge 0.9 2.7 5.0Defined contribution scheme - totaloperating charge 0.3 - 0.2------------------------------------------------------------------------------------Total net amount charged/(credited) toprofit before tax 3.8 15.9 (11.9)------------------------------------------------------------------------------------ Charged/(credited) to equityDefined benefit schemes- net actuarial gainsnet of deferred tax (72.9) - (44.9)------------------------------------------------------------------------------------ (b) Defined benefit pension schemes The most recent actuarial valuation was carried out at 6 April 2005 by thescheme actuary. The actuary advising the Group has subsequently rolled forwardthis valuation to 16 June 2007 and restated the results onto a basis consistentwith market conditions at that date. Due mainly to changes in the discount ratesince 30 December 2006, the pension deficit has significantly reduced over the24 weeks ended 16 June 2007. The following summary information analyses the mainchanges in greater detail. Key assumptions used in the valuation of the schemes ------------------------------------------------------------------------------------ 24 weeks to 24 weeks to 53 weeks to 16 June 10 June 30 December 2007 2006 2006 % % %------------------------------------------------------------------------------------Rate of increase of pensions in paymentPensions with guaranteed increases(i.e. most of the pre-1997 pensions) 3.30 3.00 3.00Pensions with increases capped at the lower of RPI or 5% 3.30 2.90 2.90Pensions with increases capped at the lower ofRPI or 2.5% 2.50 2.50 2.50Rate of increase in salaries 4.30 4.00 4.00Inflation assumption 3.30 3.00 3.00Expected return on scheme assets 7.06 7.06 7.06Discount rate 5.80 5.10 5.10------------------------------------------------------------------------------------ Balance sheet Movements in the deficit during the period were as follows: ------------------------------------------------------------------------------------ 24 weeks to 24 weeks to 53 weeks to 16 June 10 June 30 December 2007 2006 2006 £m £m £m------------------------------------------------------------------------------------Deficit at start of period (189.2) (297.1) (297.1)Current service cost (2.6) (13.2) (20.9)Past service credit - - 38.0Employer contributions 9.6 17.4 31.6Other finance expense (0.9) (2.7) (5.0)Actuarial gains gross of deferred tax 104.2 - 64.2------------------------------------------------------------------------------------Deficit at end of period (78.9) (295.6) (189.2)------------------------------------------------------------------------------------ Income statement Amounts recognised in the income statement arising from the Group's obligationsin respect of defined benefit schemes are shown below. ------------------------------------------------------------------------------------ 24 weeks to 24 weeks to 53 weeks to 16 June 10 June 30 December 2007 2006 2006 £m £m £m------------------------------------------------------------------------------------Amount charged/(credited) to profitCurrent service cost 2.6 13.2 20.9Past service credit - - (38.0)------------------------------------------------------------------------------------Net charge/(credit) 2.6 13.2 (17.1)------------------------------------------------------------------------------------ The current service cost and the past service credit are included within staffcosts. Amount charged to other finance chargesNet charge 0.9 2.7 5.0------------------------------------------------------------------------------------ Statement of recognised income and expense Amounts taken to equity via the statement of recognised income and expense inrespect of the Group's defined benefit schemes are shown below. ------------------------------------------------------------------------------------ 24 weeks to 24 weeks to 53 weeks to 16 June 10 June 30 December 2007 2006 2006 £m £m £m------------------------------------------------------------------------------------Actuarial gain on scheme assets 21.4 - 24.2Actuarial gain on scheme liabilities 82.8 - 40.0------------------------------------------------------------------------------------Net actuarial gain 104.2 - 64.2------------------------------------------------------------------------------------ Independent review report to Galiform Plc-------------------------------------------------------------------------------- Introduction We have been instructed by the company to review the financial information forthe 24 weeks ended 16 June 2007 which comprise the income statement, the balancesheet, the statement of recognised income and expense, the cash flow statementand related notes 1 to 11. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the 24 weeks ended16 June 2007. Deloitte & Touche LLPChartered AccountantsLondon 6 September 2007 Appendix 1-------------------------------------------------------------------------------- FINANCIAL CALENDAR 2007 Trading update 22 November 2007 End of financial year 29 December 2007 2008 2007 Preliminary results 6 March 2008 Interim Management Statement 1 May 2008 (provisional) 2008 Half Yearly Report 23 July 2008 (provisional) Interim Management Statement 13 November 2008 (provisional) End of financial year 27 December 2008 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Howden Joinery